Rental Property Cash Flow Calculator
Analyze your rental property's monthly cash flow, net operating income, cap rate, and cash-on-cash return before you invest.
💰 Income
📋 Monthly Expenses
🏠 Property Info (for return metrics)
Understanding Rental Property Returns in Canada
Cash flow is the most immediate metric: what's left after all expenses including the mortgage? Negative cash flow means you're subsidizing the property each month — only justified if appreciation or other factors compensate.
Cap rate lets you compare properties regardless of financing. It tells you what the property returns based purely on its income and price — ignoring whether you're using a mortgage. A cap rate above the mortgage rate generally indicates positive leverage.
The 1% rule (popular in the US) rarely works in Canadian urban markets — a $700,000 Toronto condo earning 1% monthly rent would need $7,000/month, when typical rents are $2,500–$3,200. In Canada, appreciation has historically subsidized negative cash flow, but this carries risk. Always run the numbers on cash flow before counting on appreciation.
Frequently Asked Questions
5%–10% is considered solid. In high-cost markets like Toronto, 2%–4% is common due to high prices. Secondary cities like Hamilton, London, and Windsor often offer 6%–9%.
Yes. Net rental income (gross rent minus eligible expenses) is taxed at your marginal rate. Eligible deductions include mortgage interest, property tax, insurance, management fees, maintenance, and CCA. Report on form T776.
3%–5% is typical in urban Canadian markets. Toronto and Vancouver often show 2%–4%. Smaller cities offer 5%–7%. A cap rate above your mortgage rate indicates positive leverage.
Mortgage interest (not principal), property taxes, insurance, property management fees, maintenance, advertising, and Capital Cost Allowance (CCA). You cannot deduct your own labour or mortgage principal repayments.
The expenses that turn positive cash flow negative
Most disappointing rental investments are not bought at the wrong price — they are bought on an expense estimate that only counted the mortgage, tax and insurance. The three that reliably get missed:
- Vacancy. Even in a tight market, budget 3–5%. One month empty between tenants is 8% of the year's rent.
- Maintenance and capital reserve. A common planning figure is 1% of property value annually, or 5–10% of rent. Roofs, furnaces and windows do not fail gradually — they fail all at once, and a property with none of them replaced recently is carrying deferred cost.
- Property management. Typically 8–10% of rent. Even self-managing, price it in: it is the cost of your own time, and it is what you would pay if circumstances changed.
Add turnover costs — cleaning, paint, advertising, credit checks — plus legal fees if a tenancy goes wrong. A property that shows $150/month positive before these is realistically negative.
Tax: what's deductible, and the CCA trap
Net rental income is taxed at your full marginal rate. Deductible against it: mortgage interest (interest only — never the principal portion), property tax, insurance, utilities you pay, repairs and maintenance, management fees, advertising, and accounting or legal fees related to the rental.
The line that causes most CRA disputes is repairs versus improvements. Fixing a broken furnace is a deductible repair in the year incurred. Replacing it with a better one is a capital improvement, added to the adjusted cost base and deducted only against a future capital gain. Getting this wrong in your favour is a common reassessment trigger.
Capital Cost Allowance is optional — and usually a trap. Claiming depreciation reduces tax now, but on sale it is "recaptured" and added to income in full, at your marginal rate, in a single year. Worse, claiming CCA on a property that was ever your principal residence can jeopardise that exemption. Most accountants advise against claiming CCA on residential rentals unless there is a specific reason.
Rent control changes the arithmetic in Ontario
In Ontario, units first occupied on or before November 15, 2018 are subject to the annual rent increase guideline. Units first occupied after that date are exempt. This single fact can matter more to a long-term return than the purchase price: a controlled unit's rent may rise ~2% a year while your property tax, insurance and maintenance rise faster.
Also model the downside honestly. Ontario's Landlord and Tenant Board has long delays, and an eviction for non-payment can take many months during which you receive nothing and still pay the mortgage. A single bad tenancy can erase several years of positive cash flow — which is the real argument for a cash reserve rather than maximum leverage. Check increases with the Ontario rent increase calculator, and see our rental ROI guide.